Iran’s Natural Gas Potential Iran’s place as a natural gas supplier to

Europe

Eurasia Dialogues, 2015 Moscow, Russia

Kalina K. Damianova, Research Associate

European Centre for Energy and Resource Security(EUCERS)

Department of War Studies, King’s College London

Kalina K. Damianova

STRUCTURE

1. Iran’s Gas Sector: production, consumption and

policies

2. Important stakeholders: NIGC and its subsidiaries

3. Current projects and future prospects

4. Iran’s potential role as a natural gas supplier to Europe

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GAS SECTOR

Vast potential

Minimal realisation?

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GAS SECTOR

• World’s 2nd largest natural

gas reserves

• 3rd largest gas domestic consumption 2013

• Minimal exports

• Net gas importer

Turkmenistan

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IRAN’S NATURAL GAS EXPORTS

DESTINATION BCM PER YEAR

START DATE

Turkey 10* 2001

Armenia 1.1-2.3 2007

Azerbaijan 0.3 – 0.7 2005

IRAN’S NATURAL GAS IMPORTS

SUPPLIER BCM PER YEAR

START DATE

Turkmenistan (I)

8 1997

Turkmenistan (II)

UP TO 14 2007

*has not reached full capacity Source: data from NIGC, Iran Gas Industry presentation 2015

0

50

100

150

2002

00

4

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

Bill

ion

cu

bic

me

tre

s

Gas Production vs. Consumption

Production

Consumption

*Excludes gas flared or recycled.

Includes natural gas produced for Gas-to-Liquids transformation.**Excludes natural gas converted to liquid fuels but includes derivatives of coal as well as natural gas consumed in Gas-to-Liquids transformation. Source: Kalina,EUCERS’ graph based on BP Data (BP Statistical Review of World Energy, June 2015)

More gas allocated to domestic market to

free oil for exports

Heavily subsidised gas prices

Kalina K. Damianova

Source: based on NIGC data

13%

7%

10%

70%

Iran's Gas production 2013

Re-injection

Flaring

622

Mcm/d

64%

25%

11%

Gas Consumption by Sector (Persian calendar year ending

March 2015)

Commercial/Household/Small Industries

Power Plants

173.8

Bcm

Gas re-injection into declining

oil fields

Stimulating natural gas based

industry

BY SECTOR

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NATIONAL IRANIAN GAS

COMPANY

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IRI Constitution 1979

• Article 44.2 puts 'all large-scale and mother industries' under public ownership and administration by the State.

• Article 45 considers all mineral deposits a 'public wealth and property' that '/…/ shall be at the disposal of the Islamic government for it to utilise in accordance with the public interest'.

• Article 153 [No Foreign Control]: '[a]ny form of agreement resulting in foreign control over the natural resources, economy, army, or culture of the country, as well as other aspects of the national life, is forbidden'.

Kalina K. Damianova

Kalina K. Damianova

Ministry of Petroleum

Main Affiliated Companies

NIOC National Iranian

Oil Co.

NIGC National Iranian Gas

Co.

NIPC National Iranian

Petrochemical Co.

NIORDC National Iranian Oil

Refining and Distribution Co.

Source: NIGC

NIGC subs:

• National Iranian Gas Export Company - NIGEC • Provincial Gas Companies • Gas Treating Companies • Iranian Gas Transmission Company • Iranian Gas Engineering and Development Company • Iranian Underground Gas Storage Company • Iranian Gas Commerce Company

GAS SECTOR

STRATEGY 8-10 % of natural gas trade

More than 300 Bcm production by 2020

Development of the South Pars gas field

Expanding domestic pipeline system

Developing regional export pipeline infrastructure

Decreasing domestic consumption & improving efficiency

Completion of main LNG projects

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PROSPECTS FOR GROWTH

Current and potential projects

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Source: EIA, BP, in Akhundzada, Emin, and Seray Özkan. "Iranian Energy Outlook." 2014.

Map Source: EIA

NATURAL GAS

FIELDS

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South Pars + Qatar side of

the field: world’s largest

natural gas field

GAS FIELDS

DEVELOPMENT

• Potential to increase gas

production with

300MMcm/d by 2020

• More than 543MMcm/d

after 2025

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GROSS GAS PRODUCTION 330 Billion Cubic Metres by 2020

Kalina K. Damianova Source: K.Damianova,EUCERS

DEMAND High case: Iran have difficulties to

cover domestic demand

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EXPORT POTENTIAL Investmensts Production Consumption Iran - key natural gas exporter after 2020

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INFRASTRUCTURE

PROJECTS

NIGC:

• IGAT 9 & gas export

lines to Europe

• IGAT 7 & export lines

to Oman&Pakistan

• IGAT 6 & export lines

to Iraq

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Map Spurce:EIA Source: NIGC, Iranian Gas Industry: Opportunities&Challenges presentation

PIPELINE PROJECTS

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Source: NIGC, Iranian Gas Industy: Opportunities&Challenges presentation

LNG PROJECTS

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Source: NIGC, Iranian Gas Industy: Opportunities&Challenges presentation

IRAN’S PLACE AS A NATURAL

GAS SUPPLIER TO THE EU

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EUROPEAN ENERGY

SECURITY

ENERGY UNION • Pool resources, connect networks and unite the EU's power when negotiating with non EU countries.

• Diversify energy sources – so Europe can quickly switch to other supply channels if the financial or political cost of importing from the East becomes too high.

• Help EU countries become less dependent on energy imports. • Reduce Europe's energy use by 27% or greater by 2030 • Build on the EU's target of emitting at least 40% less greenhouse gases by 2030 • Make the EU the world number one in renewable energy and lead the fight against global

warming

Supply Routes

1. Opening the Southern

Gas Corridor

2. Developing the

Mediterranean Hub

3. Building LNG terminals

Declining indigenous

production

Growing demand

Relying on few gas suppliers

Kalina K. Damianova Graph Source: GazpromExport

IRAN’S PLACE IN EU’S GAS

SUPPLY

LNG

Norway

Nord Stream

Existing Russia

Fourth Corridor North Africa

0

100

200

300

400

2000 2035

0

100

200

300

400

2000 2035

0

100

200

300

400

2000 2035

0

100

200

300

400

2000 2035

0

100

200

300

400

2000 2035

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1. Vast natural

gas production

potential

2. Domestic

infrastructure

expansions

3. Investments

flow due to

sanctions relief

Source: M.Kuhn ‘Enabling Iran’s Natural Gas Options’, 2014

EC FOR IRAN

„Iran seems to be a credible alternative to Russian gas in the long term“

IN-DEPTH ANALYSIS: The EU’s energy security made urgent by the Crimean crisis

Author: Pasquale DE MICCO DIRECTORATE-GENERAL FOR EXTERNAL POLICIES

Support the opening of the Southern Corridor as a route for the diversification of supply for Europe and the Balkan region, also connecting it to the Interconnection Greece-Bulgaria, Interconnection Turkey-Bulgaria and Ionian – Adriatic pipeline, and ensure the possibility for sources from other potential suppliers (e.g. Iraq, IRAN, Mediterranean Sea and Turkmenistan) Council of the European Union Draft Follow-up to the European Council - Energy security

‘Iran negotiations, if successful, might lead to a progressive reopening of Iranian oil and gas markets towards Europe’- Domenique Ristori, the Director General for Energy, EC in the 2014 January edition of the EC’

Kalina K. Damianova

SOUTH GAS CORRIDOR

EU-Iran gas supply routes

1. Increase gas

production

2. Develop

domestic

infrastructure

3. Revise gas

prices issues

4. Expand Iran-

Turkey pipeline

Kalina K. Damianova

Source: open data

LNG

EU LNG strategy - priority

LNG exports proffered by Iran:

• More costly

• More flexible

• Direct connection

Kalina K. Damianova

If neighbourhood gas export

projects reaslised and present

exports increased, more than 50

MMcm/d for LNG, only after 2025.

LNG prices and market growth:

Asia vs. Europe

Source: Kuhn, Enabling Iran’s Natural Gas, 2014

SOURCES:

• M.Kuhn, Enabling the Iranian Gas Export Options,

Springer 2014

• K.K.Damianova, Iran’s Re-Emergence on Global

Energy Markets, EUCERS/KAS 2015

• Facts Global Energy (FGE)

• International Energy Agency (IEA)

• National Iranian Gas Company (NIGC)

• Petro Energy Information Network SHANA

• Gazprom Export

Kalina K. Damianova

СПОСИБО БОЛЬШОЕ!

THANK YOU!

Kalina K. Damianova

Research Associate

European Centre for Energy and Resource Security(EUCERS)

Department of War Studies, King‘s College London

Kalina_Damianova@yahoo.co.uk